Succession Plan Still in Shape?

Due to changes in circumstances resulting from the coronavirus pandemic we have seen increasing numbers of clients who are, amongst other things, concerned about the currency of their estate and succession. From these recent experiences, in conjunction with Hall & Wilcox (an estate planning specialist law firm on our professional network team) we have put together a short checklist for clients to review to ensure their succession planning is up to date.

1. Changes in asset values

Market fluctuations and business pressures over the past six months are likely to have impacted on the value of the estate. Where clients have specifically gifted items based on past values, these gifts should be reviewed.

For example, if shares in Qantas have been left to one child, and Amazon shares to another, on the basis of equal value at the time the Will was prepared, one child may be significantly disadvantaged as a result of market movements.

2. Providing financial assistance (and how best to protect this)

The Bank of Mum and Dad is the fifth largest source of lending in Australia behind the Big Four, loaning around $65 billion in 2017. We have had many recent enquiries where Mum and Dad have been asked to act as guarantors for a loan or provide financial assistance to family members who are struggling.

Documenting these arrangements properly, especially where they are intended to be a loan, can make a significant difference if there is a breakdown in relationship, or a bankruptcy or insolvency event.

3. Bankruptcy

Bankruptcy concerns are becoming very real for many clients.

For beneficiaries under a Will, ensuring inheritances pass via testamentary trusts provides the best possible opportunity to protect their inheritance from being exposed.

It is also critical for clients who may be at risk to review their own asset protection/structuring and consider whether any steps can be taken to reduce exposed assets (subject to any bankruptcy clawbacks).

4. Divorce/separation

Relationship breakdown is an unfortunate reality for many during stressful times. Many people incorrectly assume that a separation automatically voids a Will and other succession planning arrangements. This misunderstanding and a failure to update the succession plan will lead to assets ending up with the very person that the deceased no longer wants to receive them.

A thorough succession planning review is critical for remarried couples with blended families given the added complexity of their affairs.

5. Superannuation adjustments

If you have made recent superannuation withdrawals (as many Australians have), or the balance of your fund has reduced, there may now be inequalities under your Will or succession plan that need to be addressed.

All superannuation death benefit nominations should be reviewed (in conjunction with other arrangements) to ensure you are not inadvertently creating an inequality in your estate plan.

Time for a health check?

A regular review of these types of matters can avoid unnecessary lack of clarity, added cost and family disputes from an outdated succession plan, including inequality between beneficiaries, loss of inheritance due to bankruptcy, and disputes around the provision made by the Will.

Next steps

If you would like to get your estate planning affairs in order or to discuss other intergenerational wealth transfer options that may be available to you and your loved ones, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.